By M Katie Helle, CPA –
With the new year upon us, many people start to think about their finances and how they can set themselves up for a prosperous future. Creating a budget is important because it will help you stay on track with paying your bills, creating a savings cushion, and setting financial goals. They can help identify areas where you may be spending more money than you would like such as groceries or eating out.
There are four basic steps you can use to create a budget:
- Determine what your monthly net income is. This is the income you receive after taxes are withheld.
- Track your spending by listing all your fixed and variable expenses. Fixed expenses are considered regular monthly bills such as your rent, car payment, or utilities. Variable expenses include items such as gas, groceries and eating out.
- Determine your short- and long-term financial goals. This may be to create a $1,000 savings cushion, payoff a credit card or purchase a new car.
- Make a plan with the information in three steps above. It’s much easier to create your plan in a document such as Microsoft Excel or find a free cloud-based software where you can track everything monthly. Mint by Intuit offer’s an excellent budget tool where you can link your accounts, loans, and investments to track goals.
Once you have your budget set, it’s important to look at it monthly to adjust as you acquire additional expenses. It’s also helpful to use this monthly to check-in with your spending habits and keep yourself on track.
There are several free resources available online to help with budgeting. Below are some additional links that you may find helpful.
For information on establishing a savings habit, click here.